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ECB Meeting Unlikely To Move Euro Exchange Rate

Dear Traders,

It’s decision day at the European Central Bank today but whether this event risk carries much weight will depend on ECB President Mario Draghi’s comments at the ECB press conference. Traders are looking for hints on when interest rates will begin to rise but ECB policy makers suggested earlier that a rate hike won’t come at least until the end of summer 2019. If there is no change in guidance, the euro could give up some of its recent gains.

General speaking, it seems unlikely that Draghi intents to move the single currency at today’s meeting, so watch out for range-bound price action.

As for the dollar, the most interesting piece of data will be released tomorrow with the U.S. 2Q GDP.

EUR/USD: The next hurdle is now seen at 1.1750 before we turn our focus to the crucial resistance area between 1.18-1.1850. Looking however at larger time frames, the currency pair remains trading sideways between 1.1850 and 1.15.

 

Summer trading break: We are slowly preparing for our summer holiday break which means that we are reducing risk exposure while adopting a cautious approach.

Announcement: Shortly after the summer break our Chief Currency Strategist will commence her maternity leave, which is why daily analysis and signals will be paused until the end of her period of maternity leave.

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The Euro’s Fate Is In Draghi’s Hands

Dear Traders,

What a trading day! The U.S. dollar extended its slide against other major currencies on the back of protectionism while the pound’s rally intensified the uptrend in GBP/USD.

Moreover, comments from U.S. Treasury Secretary Steve Mnuchin steepened the dollar’s dive. He said that” obviously a weaker dollar is good for us as it relates to trade and opportunities”, a departure from America’s traditional strong dollar policy.

Our yesterday’s long entry in the GBP/USD has proved highly profitable even though we have been on the lookout for corrections. Despite the cable’s strong uptrend which could persist over the medium-term, we may see some pullback tomorrow when both U.K. and U.S. GDP reports are due for release.

GBP/USD

The pair jumped to the highest level since June 23, 2016 – the day of the Brexit referendum. The reasons for the strong rally lie not only in the weakening dollar but also in good U.K. data and the progress in Brexit talks. On a weekly basis we got a bullish breakout suggesting that there could be accelerated bullish momentum on the way towards 1.46 – the next crucial resistance zone. As long as the pound remains above 1.40, the overall outlook remains constructive.

While the biggest story was the pound’s strong rise, the performance of the euro was not bad either. The euro broke above 1.2350 and headed towards 1.2450 ahead of the ECB meeting. Whether the euro can hold onto its high levels or can even extend its rally, will hinge on the rhetoric of Mr. Draghi at the ECB press conference at 13:30 UTC.

If ECB President Mario Draghi joins the chorus of policymakers speaking against the euro’s strength, the euro could quickly give up some of its gains. However, the devil is in the details and if Draghi fails to convince the market of the ECB’s concerns about the currency’s strength, the euro could further rise.

EUR/USD

We prepare for higher volatility today and expect larger market swings. On the topside, we will now focus on the 1.2460-barrier, which could act as a short-term resistance. For bearish momentum to accelerate, it would need a break below 1.23 and further 1.22. As long as the euro remains above 1.23 chances are in favor of the bulls.

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Markets To Enter Quiet Trading Period

Dear Traders,

With all major risk events now behind us, there was little movement in the market Thursday as many market participants around the globe are gradually leaving for the Christmas holidays. Given the seasonal liquidity drain we recommend taking profits at smaller targets now or staying on the sidelines, considering a trading break around this period.

The euro weakened against the U.S. dollar after ECB President Mario Draghi sounded cautious about the prospect of higher inflation in the coming months even though the economic outlook remains positive. The ECB unveiled updated economic projections that showed continued growth over the next three years but despite that positive outlook, the central bank is not planning to raise rates anytime soon. In a nutshell, with the ECB still being far from raising rates, euro bulls did not see a reason to push the euro higher -at least not for the time being.

The pound was little changed following the Bank of England’s monetary policy announcement. As expected, the BoE left interest rates unchanged and following the latest BoE rate hike in November, the central is not expected to raise rates in the coming months.

GBP/USD: In short-term time frames we expect the currency pair to trade between 1.35 and 1.33.

EUR/USD: The 1.17-support remains in focus and if the euro drops below that important barrier, we expect further losses towards 1.16. Above 1.1930 however, the euro could head for 1.2050.

We wish you a beautiful and peaceful pre-Christmas period.

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Any and all liability of the author is excluded.

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ECB Decision Day: Hawkish Or Dovish Taper Mr Draghi?

Dear Traders,

It’s decision day at the European Central Bank and traders in all EUR crosses brace for heightened volatility at this highly anticipated event that will bring forth news on the pace of the ECB’s quantitative easing program (QE). The euro traded higher against the U.S. dollar ahead of today’s announcement since the ECB is expected to announce a reduction in the size of its monthly bond buying. While this expectation alone is considered euro-positive, the devil is in the details. There are a number of possible scenarios while the best (but most unlikely) scenario for the euro would be a reduction of EUR40 billion bonds buys until September 2018. The most likely scenario is however a taper of 30 billion euros with a nine-month extension of the QE program. Since the latter scenario is already largely priced in the euro’s price development, the risk is tilted to the downside if the ECB fails to surprise the market. Bearing in mind that ECB policy makers want to avoid a too strong euro they need to be careful in their statement. If the market senses a more cautious approach towards monetary policy normalization or in the case of a reduction of only EUR20 billion bond buys per month, the euro could fall.

Whatever the case, the good news is that ECB President Mario Draghi can be expected to emphasize that the Eurozone economy is in a good shape and probably capable to withstand tighter monetary policy over the medium-term.

The ECB’s decision will be announced at 11:45 UTC and Draghi will speak 45 minutes later.

EUR/USD

The euro currently trades around the resistance line of its recent downtrend channel near 1.1840. If the euro breaks above this barrier, the focus will shift to the 1.19-level. A sustained break above 1.1915 is needed to encourage euro bulls for a run for 1.20 or 1.21. If 1.19 however holds, particular focus remains on the 1.17-support. A renewed break below 1.1680 and 1.1650 could send the euro towards 1.1580.

The British pound rose on upbeat U.K. GDP data that bolstered the case for a Bank of England rate hike next week.

From a technical point of view, the primary uptrend channel finally proved correct and suggests that we may see further gains towards 1.33 and 1.3350. A break above 1.3365 would brighten the bullish outlook. A current support is however seen at 1.3150.

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2017 Maimar-FX.

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All Eyes On Draghi: Will He Talk Down The Euro?

Dear Traders,

The British pound finally broke above 1.2865 this morning and a next hurdle could now be at 1.29. If the pound rises above 1.2910 we may see a run for 1.30. Let’s us wait and see.

The much anticipated U.S. tax plan disappointed investors as it left too many unanswered questions and did not reveal anything new. The U.S. dollar weakened against the euro and pound as a result. The “phenomenal” tax plan came in as a one-page list of bullet points and was largely devoid of detail.

Euro traders will shift their focus to the European Central Bank meeting while no changes are expected from the central bank. ECB President Mario Draghi will most likely maintain a dovish monetary policy stance since a strong euro is the biggest problem for policy makers and makes it more difficult for the ECB to achieve its inflation target. In a nutshell, we doubt that Draghi is debating an exit from its extraordinary stimulus. With no fresh insights, the ECB meeting could thus be a non-event for traders but let us be surprised.

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2017 Maimar-FX.

www.maimar.co

 

 

ECB Decision: Stimulus Change Would Be Premature

Dear Traders,

It’s ECB decision day and the euro trends slightly lower against the U.S. dollar ahead of the event risk. Meanwhile, the dollar received some support by an unexpectedly robust ADP employment report which nearly doubled the 185K forecast, lifting estimates for tomorrow’s non-farm payrolls report. A Fed rate increase is therefore priced in as a near-certainty. However as certain as next week’s FOMC rate decision seems, the tightening cycle in subsequent meetings has not accelerated. Hence, the greenback seems to be unimpressed by the hawkish outlook.

Euro traders will pay close attention to comments from European Central Bank president Mario Draghi. The bar is high and investors are looking for clues as to whether the conditions are right for a stimulus change. However the central bank is not expected to signal any change in policy today as policy makers will keep QE probably going until the end of the year. Even with euro-zone inflation at 2 percent for the first time in four years, Draghi is expected to maintain a dovish bias for the time being. The ECB must very cautiously reduce the level of current stimulus and it will therefore seek to avoid unnecessary turmoil. Nevertheless, inflation forecasts are expected to be revised higher for 2017 and 2018, which is why some market indicators point to the possibility of a rate hike in 2018.

The ECB’s decision will be announced at 12:45 UTC, followed by the ECB press conference 45 minutes later.

As usual, traders should prepare for volatile swings around the time of the press conference. Technically, the euro’s downtrend remains intact with the focus being on a next lower target at 1.0515/10. The 1.05-support level could lend a strong support to the euro which is why traders should also consider possible pullbacks in short-term time frames. A current resistance is seen at 1.0550, a level where sellers might jump back in. If the euro breaks however above 1.0575 we may see further gains towards 1.0640 and possibly even 1.0670. A break below 1.0490 could increase bearish momentum towards 1.0390.

The pound sterling extended its losses against the greenback and dropped to a low of 1.2139. We still anticipate some corrections in short-term time frames, sending the pound higher towards 1.23 and possibly even 1.24. On the bottom side there is a crucial support area ranging from 1.21 to 1.20. The pound may have difficulty to break that support zone ahead of the trigger of Article 50. No date has yet been fixed for the potential Brexit trigger, which is supposed to take place before the end of March.

Daily Forex signals:

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2017 Maimar-FX.

www.maimar.co